Published in the San Diego Union-Tribune, August 3, 2020
There is a difference between entrepreneurship as practiced and promoted in Silicon Valley and entrepreneurship as it relates to what many people refer to as “small business.” I have a story to tell.
I am a mentor/coach to an over-35 CEO, who built a business selling driveway alarms online. The product would alert you when someone approaches your house. Never going to be a unicorn, but was definitely profitable. A common theme in growing a small business is that most entrepreneurs who “take their shot” (the musical “Hamilton”), and who finally succeed, often acknowledge that it was not their first try. The men and women of “small business” have that DNA gene that drives them, and it is usually company N+4 that is the one that makes it.
So, meet Mr. T. The end of the story is that he successfully sold his alarm business a month ago for over $2 million. But the end belies the long-distance marathon road traveled from 2001 with his first try shortly after 9/11. “I ate Jack in the Box burgers every day (no 39-cent curly fry upgrade for me), and I was living in a trailer.” That does not sound like the student at Stanford who wanders down Sand Hill Road and gets multiple term sheets.
T. pivoted a few times and finally the business grew. When I first got involved, T. thought he could sell it for more than $5 million. I encouraged him to take the money and run, but he rejected that idea, thinking that maybe he could get even more. Pause, breathe and re-read the last sentence. There is a powerful lesson here for all entrepreneurs. To quote Bernard Baruch, “I made all my money by selling too soon.”
T. hit some bumps (supply chain/competition) and revenue began to decline. Eight months ago, he bit the bullet and put the business up for sale. He engaged a big-shot broker from New York, he danced with potential suitors, but in the end, crickets. Many years of hard work and he acknowledges the deep disappointment. “The world comes back and says we don’t want you.” He says, “I cried, I drank, I numbed myself with pills, I felt ashamed and embarrassed.” I tell you that every entrepreneur, everyone, has stood in T.’s shoes. Those shoes come in all sizes and all colors, both slip-on and laces, flats and high heels.
Even after the successful sale, he says, “I felt I had let my team and myself down by not selling when I should have two years ago.” Look, it was a good exit, but his story stands in stark contrast to what David Sax, Bloomberg Business Week, calls the romanticism of “the high-profile tech startup and its charismatic, venture-backed young founder.” Sax calls it “a new class of celebrity hero.” So, my question is — are we honoring the right heroes?
Statistically small businesses employ less than 10 people and only 17 percent of them ever get outside financing (friends, family, fools). And less than 0.05 percent of small businesses ever raise venture capital. In 2019, less than 3 percent of VC-backed companies were women-led, only 1 percent of VC-backed founders were Black and 1.8 percent were Latino. You’d have better luck in Vegas.
Sax writes that entrepreneurship has actually declined in America at this time. There is a winner-take-all attitude in Silicon Valley that does not support the little guy with his driveway alarm, or toy store, or restaurant, or tattoo parlor, or gym. And that list is at the center of what supports the dream of small business ownership and self-reliance. That list creates jobs.
To create a more robust, equitable and diverse environment to expand that list, meet Mara Zepeda. She founded Zebras Unite, which now has 5,000 members, and their goal is to “save these community businesses and the neighborhoods that are the heartbeat of who we are.” They pool resources and ideas to support each other “like a herd of zebras.” Sax writes that the mythology of the maverick (Steve Jobs) obscures the loneliness of the long-distance entrepreneur.
On a personal note, I am taking one more “shot” by going back to prison to see if touch and technology can improve the recidivism rate of the formerly incarcerated. Can’t retire.
Rule No. 670
I know a hero when I see one.